The S&P/TSX composite index has been under pressure lately, but National Bank Financial Inc. suggests that there could be more downside to come.

In a research note, NBF says that the Canadian index is off by about 8% from its most recent peak. Yet it is holding up much better than U.S. benchmarks, as the S&P 500 is now down by about 20% from its most recent high last October.

“The good news is that historically, Canadian equities perform better than their U.S. counterparts during S&P 500 declines of roughly 20% or more,” NBF reports. It says that the Canadian market outperformed the U.S. index in five of the past seven episodes when the S&P 500 fell sharply. The average S&P 500 decline during these episodes was –30.4% compared to 26.3% for the S&P/TSX.

“However, it should be noted that only once (in 1976-78) have we seen a 20%+ decline in U.S. equities that did not result in a 16%+ decline in Canadian equities. In other words, history suggests that there could still be more downside for Canadian equities,” it says

“We would not be surprised to see more weakness in Canadian equities in the weeks ahead, especially considering that the ongoing U.S. slowdown coupled with commodity deflation could bring headwinds to cyclical sectors,” NBF concludes.